Tax inversion investment
is a possible risk for Italian companies operating in Poland, especially if
managed by people residing in Italy. An often underestimated issue about which
Mr. Alberto Birtele of IC&Partners Poland which tells us the main aspects.
IC&Partners is a company specializing in tax and legal consulting in Poland
with a vast network of offices around the world and over twenty years of
activity on international markets.
Mr. Birtele, what does
tax inversion mean?
This term refers to the
fictitious location of one or more companies, attributable to the same economic
entity, outside the Italian territory, with the main intention of taking
advantage of facilitated forms of taxation. The choice in itself is legitimate,
but it becomes relevant in the event that the company incorporated abroad is,
in fact, considered fiscally resident in Italy.
What does the
legislation provide?
First of all, it should
be emphasized that this problem derives from a precise verification of the
existence of elements such as to qualify a foreign company as a tax resident in
Italy. We can say that for the purposes of income taxes all companies and
entities that for most of the tax period have alternatively in the territory of
the State are considered resident in Italy:
1. registered office:
identified in the registered office indicated in the deed of incorporation and
in the articles of association;
2. headquarters of the
administration: it is the place where the management activity is carried out,
to be inferred from concrete data;
3. main object: it is
the essential activity for directly achieving the primary purposes indicated by
the law, by the articles of association or by the statute.
What are the possible
impacts of this legislation on Polish companies of Italian "extraction"?
Let's focus above all on
the "administrative headquarters", as it is of greater practical
importance. On the basis of Italian law, a company under Polish law (foreign in
general) can be considered for tax purposes a company under Italian law, if it
is demonstrated that the main strategic decisions relating to the management
activity or for the pursuit of the purposes of the entity are taken in Italy.
Redeveloping the
residence for tax purposes of a Polish company involves subjecting it to the
ordinary tax regime in force in Italy, with rather important consequences.
What are the main
consequences in the event of a tax inversion dispute?
In the event of a
dispute by the Italian Revenue Agency of tax inversion to a foreign company,
the consequences can be quite heavy. The redevelopment of the residence of the
foreign company involves in fact the subjecting of the same to the ordinary
Italian tax regime and consequently the application:
- the ordinary taxation
envisaged in Italy on income;
- sanctions for failure
to keep accounting records;
- sanctions for failure
to submit tax and VAT returns;
- the taxation of
dividends and capital gains and other tax consequences of various kinds.
The criminal profiles of
the case are not lacking, as the omitted declaration pursuant to art. 5 of the
Legislative Decree. 74/2000 is considered a tax crime. It should be remembered
that criminal liability is personal and can be applied to directors and to
their assets.
What controls do the
Italian tax authorities operate in relation to tax inversion?
The Italian tax
authorities use certain symptomatic elements to lodge disputes regarding the
tax inversion, such as:
- place of residence of the directors, verifying whether there is a prevalence of directors resident in Italy;
- place where the Board of Directors meetings are held (verification of the directors' stay abroad). In case of videoconference meetings, check the availability of the necessary technical equipment material;
- place of delivery and departure of
business correspondence, fax and / or e-mail communications;
- place of stipulation of the contracts
relating to the activities carried out by the company;
- availability of financial relationships
from which the company draws the provisions for the performance of corporate
activities;
- place of procurement, preparation and
formation of documents, accounting or other;
- autonomy of the country managers of the foreign company in making management decisions place of execution;
Could COVID-19 have an impact on the issue
of foreign investment?
Definitely in the negative. Consider, for
example, all those situations in which the Italian directors or shareholders of
a Polish company were unable to travel to Poland to participate in the
administration and management of the company itself. In this regard, the
individual specific cases will be assessed but I remain of the opinion that the
Revenue Italian Agency will hardly grant "discounts" and mitigating
circumstances.
What can you recommend to companies operating
in Poland and which are "linked" to Italy in order to avoid disputes
regarding tax inversion?
I may suggest you to rely on professionals who know both Polish and
Italian legislation: considering the rather heavy consequences, it is better to
avoid improvisations. IC&PARTNERS has been present for many years both in
Poland and in Italy, has an in-depth knowledge of the legislation in force in
the two countries and is able to provide customized solutions in order to
guarantee the customer with respect to the issue of foreign investment.
For further information and insights
please visit the website www.icpartnerspoland.pl or write an e-mail: info@icpartnerspoland.pl